Forexpros – Copper futures fell sharply on Monday, hitting a two-day low as fresh fears that the euro zone’s debt crisis will spread to Italy and ongoing political uncertainty in Greece prompted investors to shun riskier assets.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.506 a pound during European morning trade, tumbling 1.64%.
It earlier fell by as much as 2.04% to trade at USD3.493 a pound, the lowest price since November 3.
Concerns that the euro zone’s debt crisis will spill over to Italy intensified after the yield on Italian 10-year government bonds soared to a euro-lifetime high of 6.58% earlier Monday, quickly approaching the 7% mark that prompted peripheral euro zone nations, Greece, Portugal and Ireland to seek bailouts.
European Central Bank Governing Council member Yves Mersch said earlier that ECB policymakers discussed not buying Italian debt if conditions are no longer met.
Adding to concerns, Prime Minister Silvio Berlusconi’s government faces a key parliamentary vote on Tuesday, amid growing opposition from within his own political party.
Italy’s turmoil overshadowed an announcement by Greek Prime Minister George Papandreou saying that he would step down to allow the creation of a national unity government intended to secure international financing and avert a potential default.
However, uncertainty remained as Papandreou was to meet with opposition leader Antonis Samaras later in the day to decide the head of the new government.
The downbeat news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the U.S. dollar and gold.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.54% to trade at 77.53.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Elsewhere on the Comex, gold for December delivery rose 0.57% to trade at USD1,766.15 a troy ounce, while silver for December delivery added 0.27% to trade at USD34.17 a troy ounce.
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